Growth in its licensed business with Target Corp. wasn’t sufficient to offset steep declines in its relationship with Tesco in Europe, cutting Cherokee Inc.’s third-quarter profits by more than half.
Henry Stupp, chief executive officer of the Van Nuys, Calif.-based brand management company, said U.S. retail sales and royalty revenues from the Cherokee brand’s business with Target were each up 15.4 percent. “Internationally, our retail sales and royalty revenues were down 47.6 percent and 43.2 percent, respectively, over the prior year’s quarter, almost entirely due to a decline in the sales of Cherokee products at Tesco,” he noted. “Conversely, overall sales and royalty revenues for our other international retailer partners were up almost 2 percent.”
In the three months ended Oct. 29, net income fell 54 percent to $1 million, or 12 cents a diluted share, from $2.3 million, or 26 cents, in the 2010 period. Overall royalties slipped 21.8 percent to $6 million from $7.7 million in the year-ago quarter.
“We continue to diligently work with Tesco to develop a framework for success going forward, as well as introducing the Cherokee brand into new markets to offset any revenue erosion as we work on a correction with our Tesco business,” the ceo noted. “Specifically, we look forward to launching in both Japan later this month and the Russian Federation in the coming months, and we continue to pursue new opportunities for all our brands, both owned and represented.”
Tesco has the license for the Cherokee brand in the U.K., Ireland and certain central European markets.
During the quarter, Cherokee hired two former Target executives, Sally Mueller and Jamie Curtis, as chief brand officer and vice president of marketing, respectively.
For the nine months, Cherokee’s net income fell 22.2 percent to $6 million, or 70 cents a diluted share, while royalty revenues were down 16.3 percent to $19.6 million.
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